*This order and judgment is not binding precedent, except

under the doctrines of law of the case, res judicata, and

collateral estoppel. The court generally disfavors the citation of

orders and judgment; nevertheless, an order and judgment may be

cited under the terms and conditions of 10th Cir. R. 36.3.

 

**The Honorable Frank M. Coffin, United States Senior Circuit

Judge for the First Circuit, sitting by designation.

UNITED STATES COURT OF APPEALS

Filed 1/10/96

TENTH CIRCUIT

____________________

AMERICAN SECURITIES TRANSFER )

INCORPORATED, )

)

Plaintiff-Appellee, )

)

v. ) No. 95-1021

) (D.Ct. No. 93-B-1432)

PANTHEON INDUSTRIES, INC., ) (D. Colorado)

)

Defendant-Appellee, )

)

A.R.G.I., INCORP., and )

PRINCETON AMERICAN CORPORATION, )

)

Defendants-Appellants )

___________________

ORDER AND JUDGMENT*

___________________

Before BRISCOE, COFFIN** and BARRETT, Circuit Judges.

___________________

Plaintiff American Securities Transfer, Inc. (AST) brought

this interpleader action to resolve conflicting claims to a

certificate representing 2 million shares of common stock of

Pantheon Industries, Inc. The shares were issued to defendant

A.R.G.I. Incorp. (ARGI), which assigned them to a predecessor of

defendant Princeton American Corp. ARGI subsequently asked AST,
-2-

Pantheon's stock transfer agent, to reissue the certificate after

removing a restriction against transfer from its face. Pantheon,

however, directed AST not to remove the restriction, and claimed

that the certificate was invalid because the consideration for it

never had been paid. Caught in the middle, AST filed this action

pursuant to 28 U.S.C. §§ 1335, 1397 and 2361. The district court

concluded that, for different reasons, neither ARGI nor Princeton

could obtain relief, and it awarded possession of the stock

certificate to Pantheon. ARGI and Princeton appeal, arguing that

the court unfairly created a Catch-22 by denying both of them --

the transferor and the transferee of the certificate -- the right

to pursue a recovery. Having carefully reviewed the record, we

conclude that the perceived dissonance in the judgment is largely

attributable to appellants. We consequently affirm the court's

decision on damages. We remand, however, for further inquiry on

the limited question of who is entitled to possession of the

certificate.

I. Background

AST, as Pantheon's stock transfer agent, issued the disputed

certificate to ARGI in March 1990. Although the certificate bore

a restrictive legend barring transfer except in certain specified

circumstances, ARGI in 1991 assigned it to a company (Minco) that

shortly thereafter sold its assets to Princeton. ARGI's

consideration for the certificate included a $40,000 promissory

note on which no payments ever were made.
-3-

In August 1992, Pantheon advised AST that the certificate had

been issued in error and directed AST to cancel it. AST responded

that it could not cancel the certificate, but would place a stop

transfer order against it. The following year, ARGI submitted the

certificate to AST and requested that a new one be issued without

the restrictive legend. Informed of the request by AST, Pantheon

directed that the certificate not be re-issued or transferred

because ARGI's promissory note had not been paid. To resolve the

competing claims, AST filed this interpleader action, naming ARGI,

Princeton and Pantheon as defendants.

Each of the defendants added its own claims. ARGI and

Princeton filed a counterclaim seeking damages from AST for a

breach of the Colorado counterpart to Article 8 of the Uniform

Commercial Code, which imposes a duty on an issuer or transfer

agent to register the transfer of securities as requested if

certain preconditions are met. See Colo. Rev. Stat. § 4-8-401.

ARGI and Princeton also filed crossclaims against Pantheon, matched

by cross-claims filed by Pantheon against them.

Following motions for summary judgment filed by all parties,

the district court on December 2, 1994, granted judgment for

Pantheon and AST on Princeton's UCC claim. 871 F. Supp. 400, 407.

It concluded that, based on the undisputed evidence, AST owed no

statutory duty to Princeton because only ARGI had requested the

certificate's reissuance. It therefore dismissed Princeton's UCC

claim, but held that the other parties' claims involved factual

disputes that could not be resolved on summary judgment.
-4-

On December 7, Pantheon, ARGI and Princeton stipulated to the

dismissal of various claims brought by each of them. The next day,

Pantheon filed a motion seeking to amend its crossclaims to request

specific performance, rather than rescission, as the remedy on its

breach of contract claim. ARGI and Princeton objected to this

proposed change, and a hearing was held on the Motion to Amend on

December 14.

During the course of that hearing, a discussion took place

concerning a proposed claim by Pantheon for attorney's fees against

ARGI and Princeton. Princeton's counsel expressed his belief that

Princeton had been dismissed from the case as a result of the

district court's December 2 summary judgment ruling. When it

appeared that the decision had left pending one of Princeton's

claims for relief, the company's counsel moved to dismiss that

claim as well. Pantheon's counsel initially objected, noting that

it had little hope of obtaining attorney's fees from ARGI, which

was bankrupt. Later, however, he agreed to consent to Princeton's

dismissal "if they are willing to throw out any claim with

prejudice, so we are not going to have an appeal on this down the

road."

The following colloquy then took place:

COURT: You are willing to dismiss any claims Princeton

may have against either ASTI or Pantheon with prejudice?

STRAUSS (Princeton's attorney): That's correct, your

Honor. Because we truthfully [] thought that had already

been accomplished by the Court's order for summary

judgment.
-5-

COURT: Mr. Helfrich [Pantheon's attorney], will you

accept that?

HELFRICH: I will, your Honor.

COURT: All right. At this time we will dismiss all

claims that Princeton may have against ASTI and Pantheon

Industries, Inc. with prejudice.

Transcript, Hearing on Motion to Amend, at 20.

The court also allowed Pantheon to amend its contract claim to

seek specific performance. In succession on the next two days,

December 15 and 16, Pantheon and AST filed new motions for judgment

on the pleadings or for summary judgment against ARGI. They argued

that, having assigned the certificate to Princeton -- which no

longer was a party in the case -- ARGI had no compensable loss.

ARGI filed an opposition.

On December 19, the morning that the trial was scheduled to

commence, the district court, after carefully considering all

arguments, granted AST and Pantheon's motions. It reasoned that

ARGI had requested as a remedy only damages, not possession of the

certificate, and that because it had transferred the stock to

Princeton it incurred no damages from the refusal by AST and

Pantheon to reissue the certificate without the legend barring

transfer. Accordingly, the court entered judgment in favor of AST

and Pantheon, and awarded possession of the certificate to

Pantheon, the only remaining claimant. The court denied ARGI and

Princeton's post-judgment motions, and this appeal followed.

II. Discussion
 

1 Indeed, Princeton's lawyer also stated that "Princeton will

assert whatever rights it believes it has against ARGI depending on

how this case comes out." Hearing at 20.

-6-

Throughout this case, appellants have focused primarily on

their effort to obtain damages from AST and Pantheon based on AST's

refusal to reissue the stock certificate without the restrictive

legend. The district court concluded that Princeton could not

bring such a claim because it had made no request of AST respecting

the certificate, and so there was no obligation running from AST to

Princeton. Notwithstanding its counsel's assertions to the

contrary, in the clear and explicit language quoted above,

Princeton subsequently (at the December 14th hearing) gave up with

prejudice all claims against AST and Pantheon.1 We therefore think

it beyond debate that Princeton has no remaining stake in this

case, having abandoned the right to appeal the December 2nd ruling

that AST had no duty to it.

We thus turn to ARGI. Its primary contention is that AST and

Pantheon cannot have it both ways: they cannot rely on Princeton's

lack of standing, the principle that underlay the court's December

2 summary judgment decision, while maintaining two weeks later that

the assignment to Princeton divested ARGI of its standing. This

depiction of the district court's rulings is, however, both overly

simplistic and incorrect.

It is true that the district court held that Princeton lacked

standing to bring a UCC claim against AST based on a lack of duty.

At the hearing on December 14, however, the court did not rule that
 

2 Although the joint counsel for ARGI and Princeton argued

that he had not intended at the December 14th hearing to give up

the right to appeal the court's summary judgment decision against

Princeton, the language we have quoted above is unequivocal. The

attorney may not have intended the consequences of a full dismissal

with prejudice of Princeton's claims, but we cannot fault the

district court for holding him to his word.

-7-

ARGI lacked standing to assert an interest in the certificate.

Rather, the court explicitly noted that the problem was not one of

standing but of the form of ARGI's requested relief:

While A.R.G.I. may have standing to assert a claim,

it doesn't mean that under the undisputed facts of this

case it has any ability to obtain judgment as a matter of

law, because when it assigned its rights, its beneficial

interest in this stock certificate to Minco [whose assets

were purchased by Princeton], it assigned any right to

damages that might be asserted either for a claim of

violation of the Uniform Commercial Code, 4-8-401, or for

breach of contract.

In other words, the court found that, whatever the merits of a

claim for equitable relief, there was no basis for a damages award.

Consistent with the focus on damages, counsel attempted to

rectify the problem by offering a ratification by Princeton of

ARGI's damages request and also sought to demonstrate an assignment

of the stock certificate back to ARGI from Princeton. The court

indicated that a ratification by Princeton would be of no avail

since Princeton had forsaken all of its claims, 2 while ARGI

presented no evidence that a re-assignment had taken place. The

court was unwilling to permit a possible future re-assignment to

derail the proceedings. 

We think the court properly handled the damages issue. Having

successfully transferred the certificate (and thus having received
 

3 We acknowledge that the district court seemed to accept that

ARGI had a viable damages claim when it dismissed Princeton's UCC

claim on December 2, and neither Pantheon nor AST argued otherwise.

We cannot fault the court, however, for failing to recognize at

-8-

whatever consideration it had demanded), ARGI is in no position to

seek damages based on AST's failure to remove the restrictive

legend barring transfer. It is Princeton who now suffers any

consequences from the restriction on the certificate. ARGI,

moreover, does not attempt on appeal to identify a compensable

injury of its own, but simply reiterates that it should have been

allowed to retrieve a damages claim from Princeton through either

ratification or re-assignment. We disagree, for the reasons

expressed by the district court.

We reject ARGI and Princeton's suggestion that this conclusion

casts them as the victims of a Catch-22. Had Princeton not removed

itself from the case -- completely and voluntarily -- it might have

been able to ratify ARGI's damages action or to seek review of the

December 2 ruling that it was not a proper plaintiff on the UCC

claim. Although Princeton's decision to dismiss all claims may

have resulted in part from a mistaken belief that ARGI's right to

request damages was uncontested, it was at least partially animated

by a desire to negate the basis for Pantheon's request to add a

claim for attorney's fees. Indeed, as noted above, Pantheon

initially objected to the dismissal. With respect to damages,

therefore, the problem for ARGI and Princeton is not that the

court's rulings boxed them into a corner. ARGI and Princeton set

their own course, and the court simply held them to it. 3 
that early juncture a flaw that no one had pointed out. We think

it likely and understandable that no one focused on ARGI's position

with respect to damages until after Princeton was out of the case.

Indeed, Pantheon and AST arguably gave ARGI the benefit of the

doubt in assuming its right to pursue damages on behalf of

Princeton so long as Princeton remained a party. Once Princeton

gave up its claims, ARGI could seek damages in this action only on

its own behalf. Although the earlier treatment of ARGI's claims

may have lulled counsel into dismissing Princeton from the case,

Pantheon and AST did not instigate that action. In short, we think

it entirely appropriate to place on ARGI and Princeton the

responsibility for protecting their own interests.

-9-

We also must consider, however, the court's simultaneous

conclusion that disposition of the damages issue requires awarding

the stock certificate to Pantheon. The court found that ARGI made

no request for possession of the certificate or for other equitable

relief. Resolution of the damages issue therefore ended its

interest in the litigation, and left pending only Pantheon and its

claim of entitlement to the stock. Without considering the merits

of that claim, the court ordered release of the certificate to

Pantheon and authorized it to cancel the certificate on its books.

Whether to affirm this aspect of the judgment has proven to be

a close call. On the one hand, ARGI at no time explicitly asked

the district court for return of the certificate or elimination of

the restrictive legend as a remedy. During the December 19th

hearing, the court three times expressed its view that ARGI had

never sought equitable relief, and observed that "the distinction

between having sought equitable relief on the one hand and a claim

for damages on the other is . . . crucial." It repeated the

thought near the end of the hearing: 
-10-

As I said, counsel, you all are sophisticated

commercial counsel. This is not a situation where we

have unsophisticated pro se parties. There are choices

made along the road when you come to the forks in

litigation. One of those choices that could have been

made was to seek equitable relief, and you didn't do it.

Hearing, at 29.

Counsel never responded that its pleadings did, in fact,

demonstrate a request for injunctive relief, focusing instead on

its argument that ARGI was a proper party to seek damages. In its

post-judgment filings and brief on appeal, ARGI's position remained

opaque. It did not expressly claim that the district court should

have viewed its pleadings to include an implicit demand for

equitable relief, stressing instead that the court erred in failing

to read its answer as claiming an interest in the certificate. The

court, however, did not deny that ARGI had asserted an "interest"

in the certificate; the problem was that it could not obtain the

only relief the court believed it had sought -- damages.

Indeed, ARGI acknowledged that it did not seek equitable

relief, asserting in its appellate brief that a party is not

required to seek equitable relief in an interpleader action.

Though this may be a correct statement of the authorities, see,

e.g., Loretto Literary & Benevolent Instit. v. Blue Diamond Coal

Co., 444 A.2d 256, 259 (Del. Ch. 1982); Rhodes, M., Transfer of

Stock §§ 22:4-22:9 (6th ed. 1985), it facially supports the

district court's judgment. Plaintiffs challenging a wrongful

refusal to transfer stock may bring either an action at law for

damages or an action for equitable relief. Id. Since appellants
-11-

emphatically assert entitlement to damages, it would seem that they

concede that they did not ask for other relief.

While this view of the case gives us an appreciation for the

district court's determination, we are reluctant, for various

reasons, to resolve this aspect of the dispute on the basis of

default. First, the nature of the damages requested here is

significant. A plaintiff who chooses a legal, rather than

equitable, remedy may recover the market value of the shares at the

time of the wrongful action "just as in the ordinary case of

conversion," Loretto, 444 A.2d at 259. See also Transfer of Stock

§ 22:9. Even in an equitable action, however, incidental damages

may be awarded for a loss caused by the wrongful delay in

transferring stock.

In the final paragraph of their UCC claim for relief (Amended

Counterclaim, ¶ 15), appellants allege that they have incurred

damages "in the nature of the diminution in market value of the

said shares since June 18, 1993, loss of potential profits." Even

AST acknowledges in its brief as appellee that this formulation

logically indicates "that ARGI seeks possession of the Certificate

plus damages measured by the value at the time of presentment to

AST less the value of the Certificate at the date of trial."

Restated somewhat more directly, the damages asserted here appear

to be for incidental loss associated with an implicit claim for

possession, and not for full value based on conversion of the

certificate. Thus, the pleadings, though far from ideal, fairly

may be read to claim entitlement to the certificate. Indeed, AST,
 

4 ARGI's imprecision is somewhat understandable in light of

Pantheon's motion, which argued that ARGI had made no claim at all

to the certificate. AST's motion, by contrast, stated:

At best, ARGI may assert entitlement to reissuance

of the Certificate without any legend subject to the

competing claim asserted by Pantheon to the Certificate.

-12-

which has no interest in the certificate itself, all but admits

that any other reading would be erroneous.

Second, counsel's failure to make this point to the district

court during the colloquy on December 19th, while not entirely

excusable, must be considered in perspective. AST and Pantheon's

motions had been filed only a few days earlier, essentially on the

eve of trial. As the district court recognized, the motions were

untimely, and normal practice would have entitled appellants to

substantially more time to respond. Counsel's focus in that timecompressed circumstance naturally was on preserving the damage

claims. In addition, while ARGI's response to the final summary

judgment motion and its motion to amend or alter judgment are not

models of clarity, it is fair to say that both highlight ARGI's

status as shareholder of record and at least hint that ARGI's claim

of an interest in the certificate embraced a request for its

possession.4 In short, there is good reason for hesitancy in

declaring default.

Third, and most crucial, is that the district court awarded

the certificate to Pantheon without any review of its substantive

argument that the certificate was invalid for lack of

consideration. No one, however, contests that ARGI is the
 

5 Such a remand will not involve any claim for damages,

including those that typically may be associated with equitable

relief, since we are affirming the court's determination that

ARGI's successful assignment of the certificate forecloses monetary

relief based on delay in reissuing or transferring it. We

recognize that appellants may have no interest in pursuing

possession, however, in light of counsel's statement at oral

argument that the stock essentially was worthless at the time of

trial. The court, of course, should consult with the parties

before proceeding.

 

6Appellants' motion for leave to file second supplemental

appendix is granted.

-13-

shareholder of record, and Pantheon is conspicuous by its absence

on this appeal. Taking all of these circumstances into account, we

believe the best course of action is to remand the case to the

district court for consideration of the merits of the right of

possession.5

We have considered appellants' remaining arguments, and find

them to be without merit.

Affirmed in part, vacated and remanded in part. Each party is

to bear its own costs.6

Entered for the Court:

Frank M. Coffin, Senior Circuit Judge